5 December 2018

Sudan Woos Russia and U.S. Firms to Build Bigger Oil Refinery

A year after the US removed a decade-long economic sanctions on Sudan, the country is in talks with American and Russian firms to build a bigger oil refinery at its main port on the Red Sea.

Sudan government officials Tuesday revealed that TK Ural Trade of Russia had proposed to build a refinery with the capacity to process 200,000 barrels per day, while Energy Link International from the US offered to build one with 100,000 barrels per day capacity.

Sudan's Petroleum and Minerals minister Azhari A. Abdalla had initially told journalists on the sidelines of the second South Sudan Oil and Power Conference in Juba last month that Khartoum was in talks with an American company.

But on Tuesday, his assistant Mr Nader Mohamed A. Khalifa, clarified that Khartoum "received expression of interest letters from the two firms in October 2018".

He added that Sudan was yet to decide on which company to pick to build the Port Sudan refinery, but it would appear that Khartoum was keen on a much bigger facility, to serve both the local and the regional markets.

"We are looking at 200,000 barrels because anything below these days is not feasible," Mr Abdalla said.

A safety valve

"What we are interested in is having a refinery at the port, serving the region. But also, it will be like a safety valve for us because we are also importing oil."

Asked if Sudan had enough reserves to feed the planned facility, Mr Abdalla conceded that the country produces much smaller volumes, after the majority of the oilfields fell into South Sudan territory when it became independent in 2011, with Khartoum retaining only 30 per cent share.

"We are not going to use our own field stock. We are leaving it to the investor [to source field stock]," said Mr Abdalla.

These moves are seen as the two Sudans jostling for the Ethiopian market, which consumes $4.5 billion worth of refined fuel per year.

For instance, South Sudan's petroleum masterplan is to build four refineries at Paloch, Pagak, Akon and Thiangrial, some of these facilities targeting Ethiopia, says Dr Abel Chol Deng, the Managing Director of country's national oil and gas company, the Nile Petroleum Corporation.

Restore relations

When complete, the refineries will add to the one at Bentiu to process a combined 127,000 barrels per day.

Sudan mainly provides transport for crude pumped from the south, on ward to Port Sudan for export, at the tariff of $9.10 per barrel.

Khartoum - long accused of stoking terrorism in the region - wants to drop this label and restore relations with its neighbours to attract investors, to rebuild its economy that took a hit when oil production was shut down after South Sudan erupted into war in 2013.

For instance, Mr Abdalla explained that Khartoum was keen to broker the peace deal between the South Sudan warring factions for it to be taken off the list of countries that sponsor terrorism.

"Some companies would like to wait until the name of Sudan is totally lifted from the list of countries that harbour terrorists... Our intention [to broker the peace deal] was that Sudan can be removed from that list," Mr Abdalla told journalists in Juba, last month.

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